With the uncertainty of today’s economy, where employees are becoming more independent and knowledgeable, there has been a drastic increase in employment-related lawsuits, making employment practices liability insurance (EPLI) a must-have. EPLI covers businesses against claims made by workers that their legal rights as employees of the company have been violated. It protects a variety of different employee lawsuits, including claims of:
- Sexual harassment
- Discrimination
- Wrongful termination
- Breach of employment contract
- Negligent evaluation
- Failure to employ or promote
- Wrongful discipline
- Deprivation of career opportunity
- Wrongful infliction of emotional distress
- Mismanagement of employee benefit plans
Depending on the type of business you operate, and how many employees you have, along with various risk factors, the cost of EPLI coverage varies. This coverage will essentially reimburse your business against the costs of defending a lawsuit in court. The policy will still cover the legal costs if your company loses the lawsuit.
Why This Is Important For Small Business Owners
For small business owners, EPLI coverage is critical to have. Within the last five years, six out of 10 employers have had to deal with employment lawsuits. If an employee sues you for wrongful termination, you don’t have the money to protect yourself and your business like a larger corporation can. A lawsuit could incur hundreds of thousands of dollars in legal costs and attorney fees. Small to medium-sized businesses pay an average of $160,000 to resolve this kind of lawsuit.
For a small business, that’s enough to take down your business, putting everything you’ve worked endless hours to achieve in jeopardy. If that’s not enough to get you to get this coverage, consider these five additional reasons:
- Employee lawsuits are growing
- Settlements are getting more expensive
- Big or small - all businesses face risks
- You can be fault-free; however, it will cost you
- Your current policy most likely doesn't provide coverage
Luckily, there are ways in which you can prevent employee lawsuits from happening. It’s essential that you educate your managers and employees so that you minimize problems from the very beginning by doing the following:
- Create effective hiring and screening programs; thus, you're avoiding any discrimination throughout the hiring process
- Hang corporate policies throughout the workplace
- Ensure policies are written out in your employee handbook, making them very clear to all employees
- Showcase what steps employees can take if they are discriminated against or sexually harassed by a supervisor
- Document everything while also showing the steps your business is taking to prevent and solve employee disputes
While having this type of coverage is the first step in protecting yourself from these lawsuits, you must also focus on your company culture. Your culture should exhibit a safe environment where discrimination and harassment of any kind are not tolerated.
Not Sure Where To Begin?
We get it. You didn’t start your business to become a lawyer and protect yourself from employee lawsuits. That’s what professional employer organizations (PEOs) are here to help with. When you partner with a PEO like GMS, you gain access to HR experts that are trained to help business owners during these challenging times. While GMS offers EPLI as a line of coverage, we do so much more than that. To prevent these lawsuits, we take proactive measures. We help create handbooks stating all corporate policies and steps in which you and your employees should take in any situation. In addition, our HR experts work hand in hand with you and your business to mitigate employment risks and address any discrepancies. GMS takes on all the administrative burdens you don’t have the time or expertise to manage effectively. Contact us today to learn more.